Delta Electronics Co (台達電), the nation’s leading power and thermal solutions provider, is expected to resume growth this quarter after last quarter’s revenue decreased 1.2 percent quarter-on-quarter due to weak growth in the telecom power supply business, analysts said.
The company saw third-quarter revenue decline to NT$72.46 billion (US$2.37 billion) from NT$73.37 billion in the second quarter, in part due to a weaker-than-expected recovery in the industrial automation sector and the front-loading of orders of power components and fans by notebook computer customers that were trying to avoid impending tariffs from the US-China trade dispute, analysts said.
However, with the US-China trade dispute hopefully ratcheting down and the Tokyo Olympic Games approaching, manufacturers and telecom operators are expected to restart their automation plans and 5G infrastructure deployment, analysts said.
In a note to clients on Wednesday, SinoPac Securities Investment Service Corp (永豐投顧) said that it maintained its “buy” recommendation for Delta’s shares, which have risen 7.72 percent so far this year — underperforming the broader market’s 16.13 percent increase — and closed at NT$139.5 on Friday in Taipei trading.
SinoPac’s 12-month target price for Delta is NT$162, which is 19 times the estimated earnings per share for next year.
SinoPac said in the note that “5G infrastructure construction will drive sales of Delta’s base station power supplies, whose output value in the 5G era will exceed that in the 4G era.”
“Delta also benefits from the US sanctions on Huawei Technologies Co [華為], since most of Delta’s clients for this segment are in Europe and the US,” it said.
Delta would also soon begin shipping lithium cell uninterruptible power supplies for Chinese telecoms, SinoPac said, adding that it expects order gains from such products to provide the company with long-term benefits.
Shipments to a major US customer should also increase next year if the client debuts its 5G handsets next year as expected, SinoPac said, without naming names.
According to market watchers, Delta is the primary supplier of the mini choke, a power management device, for Apple Inc’s iPhones.
“Our channel check shows that Delta is working on developing new products for the US tech giant’s 5G handsets, which we reckon will lead to heavier sales weighting of mini chokes for Delta in 2020,” SinoPac said.
Delta’s accumulated consolidated sales revenue for the first nine months was NT$199.94 billion, a 16 percent increase from NT$172.38 billion for the same period last year, company data showed.
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